Loads in SCED 1.0

1. Loads in SCED 1.0 Paul Wattles ERCOT Market Design & Development DSWG

2. Loads in SCED 1.0 -- Background • Pre-2010: Due to complexity, SCED dispatch of demand response not developed for initial Nodal market launch • 2011: DSWG Subgroup met throughout the year to evaluate the concept • Lack of consensus on whether/how to move forward • White Paper at Key Docs: http://www.ercot.com/committees/board/tac/wms/dswg/ • 2012: Market Enhancements Task Force considered Real Time Commitment/Real Time Dispatch platform • Would have supported Load participation in SCED • Lack of consensus; METF disbanded • White Paper also at above link • 2013: Objective is to find a way for DR to contribute to price formation • ERCOT evaluated what could be implemented by Summer 2014 • Concept document developed; NPRR draft now posted Loads in SCED 1.0

3. Loads in SCED 1.0 -- Timeline • To meet summer 2014 goal, ERCOT will need to meet following market rules timeline: • May 28Concept doc distributed to TAC/WMS/DSWG • May 31 DSWG discussion • June 6 TAC introduction to concept • June 10 Loads in SCED Workshop • June 12 WMS discussion • June 27 NPRR draft posted • June 28 DSWG review of draft NPRR • July 2 TAC discussion • July 3 NPRR filed (ERCOT sponsored) with preliminary IA • July 10 WMS NPRR discussion (vote) • July 18 PRS NPRR discussion (possible vote) • Aug. 22 PRS NPRR discussion (vote) • Sept. 5 TAC NPRR discussion (vote) • Sept. 17 BOD NPRR discussion (vote) Loads in SCED 1.0

4. High-level summary • Eligibility to participate: LSE QSEs representing Load Resources capable of following 5-minute SCED base point instructions • Existing or new single-site Controllable Load Resources (CLRs) • SCED qualification will be a new attribute for redefined CLR (more on this later) • Aggregate Load Resources (ALRs) composed of multiple sites within single ERCOT Load Zone (may be subset of CLR) • Will not support direct participation by third-party DR QSEs • Will not support DR with temporal constraints or block energy bids • New interface will allow QSEs to maintain ALR populations DSWG

5. High-level summary (cont.) • QSEs with LRs in SCED will submit Bids to buy (not Offers to sell) • Bids will reflect LR’s willingness to consume “up to” a specified five-minute Load Zone LMP • Use of Load Zone LMPs ensures consistency with PUC Rules • May be a curve or a MW bid at single strike price • Bid curve option could allow the QSE to submit bids with different strike prices for separate loads within the LR • Bid will modify the SCED demand curve and have ability to set price • SCED Generation to be Dispatched (GTBD) will be adjusted to accommodate LR participation • This will ensure proper price formation and reduce the likelihood of oscillating dispatch instructions • This creates settlement outcomes equivalent to the “volumetric flow” LMP minus G methodology endorsed by TAC, while avoiding need for ERCOT to “send back” the DR value to the LSE DSWG

6. High-level summary (cont.) • Block bids not allowed – inconsistent with SCED requirements to follow base points • If LR’s bid is on the margin, base point instructions could require LR to move up or down in increments as small as 100 kW • SCED will honor LR ramp rates (in MW per minute) as telemetered from the LR • LR will benefit from avoided cost of consumption and from price certainty due to ERCOT dispatch • No make-whole payments • No load ratio share uplifts to market for DR value • SCED will dispatch LRs for power balance and congestion management using the applicable Load Zone Shift Factor DSWG

7. High-level summary (cont.) • Eligible LRs may also participate in Non-spin Reserves • To provide Non-spin, QSE would submit an offer to provide the service in the Day-Ahead Market • If LR offer clears in DAM, QSE will be paid MCPC for awarded hours in following Operating Day, regardless of whether Non-spin is deployed • For Offline Non-Spin, energy Bids ≥$180 will need to be released to SCED within 20 minutes following dispatch, similar to Generation Resources providing Offline Non-spin • For Online Non-Spin, energy Bids ≥$120 will need to be active in SCED for all intervals that the LR is obligated in Non-Spin • Bids from LRs providing Non-Spin capped at the System Wide Offer Cap DSWG

8. High-level summary (cont.) • Implementation of Loads in SCED 1.0 is related to and dependent on adoption of NPRR 532 • CPS Energy: LR Participation in Non-spin • For ALRs, participation in SCED and Non-spin are both contingent on validation by ERCOT of the QSE’s telemetry at time of LR qualification, and spot-validation thereafter • Other Binding Document associated with NPRR 532 describes this process • Telemetry from LRs providing Non-Spin and dispatched by SCED must include Scheduled Power Consumption and SPC+2 to allow baseline-style M&V • M&V for LR in SCED for energy only does not require use of SPC and SPC+2 • All members of ALR must have revenue-grade premise level 15-minute interval metering • Via ESI ID or NOIE meter data submission process similar to ERS DSWG

9. Changes to Load Resource definitions • Loads in SCED NPRR redefines Controllable Load Resource (CLR) • CLRs will provide Regulation, RRS (as non-UFR type resource) & Non-Spin • RRS and Non-Spin from CLR will be deployed via economic dispatch of DR capacity via SCED • CLR will have RTM Energy Bid that covers the RRS and/or Non-Spin capacity released to SCED • Also can optionally bid additional DR capacity for SCED dispatch • SCED will only consider CLR for dispatch if its telemetered Resource status indicates it is On-Line • If Resource Status is OUTL, then SCED ignores CLR DSWG

10. CLR (cont.) • CLR qualifications: • To qualify for providing Regulation and RRS, tested for ability to provide Primary Frequency Response (no change from today) • To provide RRS, Non-Spin or Real-Time energy only, tested for ability to follow SCED Base Point Instructions • To provide Non-Spin or Real-Time energy only, not required to provide Primary Frequency Response •  Non-Controllable Load Resource (NCLR) • NCLR participation going forward limited to UFR-type Load Resources providing RRS • In other words, all LRs providing Non-spin must be CLRs DSWG

11. Compliance • Base point deviations calculated for under- and over-performance and added to LSE QSE charges in real-time • As drafted, these charges would apply regardless of whether LR was carrying an AS responsibility • CLREDP scores (sum of base point deviations) calculated monthly similar to GREDP DSWG

12. Impact on existing DR services • No change to existing participation in RRS by UFR-type Load Resources • No change to existing ERS DSWG

13. Loads in SCED 1.0 Participation Scenarios

14. Scenario 1 • For any SCED intervals that the LR’s bid to buy is greater than the five-minute Load Zone LMP, SCED Base Point will instruct the LR to consume at its telemetered Maximum Power Consumption, subject to ramp rate limitations from its current consumption level (NPF) RTM Bid to Buy(up to): ALR CLR (No Non-spin responsibility) Load Zone LMP SCED Base Point MPC → 5 MW DR-capable ► ► ► $50 MPC $1,000 LPC → 10 MW Firm DSWG

15. Scenario 2 • For any SCED intervals that the LR’s bid to buy is less than the five-minute Load Zone LMP, SCED Base Point will instruct the LR to consume at its telemetered Low Power Consumption, subject to ramp rate limitations from its current consumption level (NPF) RTM Bid to Buy(up to): ALR CLR (No Non-spin responsibility) Load Zone LMP SCED Base Point MPC → 5 MW DR-capable ► ► ► $1,500 LPC $1,000 LPC → 10 MW Firm DSWG

16. Scenario 3 • For any SCED intervals that the LR’s bid to buy is equal to the five-minute Load Zone LMP, SCED may dispatch the LR in either direction (up or down) in increments as small as 0.1 MW, within the bounds of the LR’s telemetered Maximum Power Consumption and Low Power Consumption, subject to its telemetered ramp rate limitations from its current consumption level (NPF) • In this scenario, the LR sets the Load Zone LMP RTM Bid to Buy(up to): ALR CLR (No Non-spin responsibility) Load Zone LMP SCED Base Point MPC → 5 MW DR-capable ► ► ► $1,000 $1,000 LPC≤ BasePoint ≤ MPC LPC → 10 MW Firm DSWG

17. Scenario 4a ALR CLR (5 MW Online Non-spin responsibility; 5 MW additional DR capability) RTM Bid to Buy(up to): Load Zone LMP SCED Base Point MPC → ► $1,000 5 MW Non-spin ► ► $1,500 LPC+5MW subject to ramp rate limitations from its current consumption level (NPF) 5 MW add’lDR-capable ► $5,000 LPC → 5 MW Firm DSWG

18. Scenario 4b ALR CLR (5 MW Online Non-spin responsibility; 5 MW additional DR capability) RTM Bid to Buy(up to): Load Zone LMP SCED Base Point MPC → ► 5 MW Non-spin LPC+5≤ BasePoint ≤ MPC subject to ramp rate limitations from its current consumption level (NPF) $1,000 ► ► $5,000 5 MW add’lDR-capable ► $5,000 LPC → 5 MW Firm DSWG

19. Scenario 5 • LR is cleared in Non-Spin in the DAM for six hours, 2-8 PM • BUT….maximum run time is 3 hours • Real-time energy bid is 5 MW at $1,000 for all six hours • In real time, Non-Spin is deployed and at 4 PM the LZ LMP goes to $1,500 and LR is dispatched • Prices stay above $1,000 for 4 hours.  • In that fourth hour, LR can’t deploy any longer (sets status to OUTL) • QSE should continue to send accurate telemetry signals even when LR status is OUTL • QSE must replace the capacity, either with a different Resource or through a trade • If can’t replace, subject to compliance violation and potential other penalties • If QSE notified ERCOT earlier of inability to run more than 3 hours, ERCOT may run a SASM, and QSE replaces capacity at the MCPC cleared in the SASM DSWG

20. Scenario 6 • Same LR, same energy bid, same scenario as previous • Difference: this time LR does not have Non-Spin responsibility (did not offer into DAM) • After LR deployed for the three hours LR hits maximum run time, QSE changes telemetry to OUTL status • SCED can no longer dispatch • QSE should continue to send accurate telemetry signals even when LR status is OUTL DSWG

21. Questions? ON OFF Loads in SCED 1.0